An IPO, or initial public offering, is frequently regarded as the quickest way for an investor’s cash to expand. If you’re thinking about investing in an initial public offering, you’ve come to the right place.
Before going to know how can I apply for an IPO? We need to know what an IPO is and how it works?
What is an IPO?
An initial public offering, also known as a stock launch, is a public offering in which a company’s shares are sold to institutional and, in most cases, individual investors. One or more investment banks normally underwrite an IPO, and they also arrange for the shares to be listed on one or more stock exchanges.
What is the Purpose of an IPO?
An initial public offering (IPO) is a technique of raising funds for major corporations in which the company offers its shares to the public for the first time. The company’s shares are traded on a stock exchange after the IPO. The following are some of the key reasons for launching an IPO: to raise funds through the sale of shares, to provide liquidity to firm founders and early investors, and to take advantage of a greater value.
Which things do we need before applying for an IPO?
Bank Account: To pay for the shares you’ve applied for, you’ll need a bank account. The amount bid for the shares has previously been deducted from the bank account. The remaining cash would be credited later, depending on the number of shares allotted; this was time-consuming. To make the payment process easier, SEBI created ASBA or Application Supported by Blocked Amounts. Depending on the number of shares you bid for, ASBA blocks a particular amount of money. After the allotment, your bank account is debited, and if you receive fewer shares than you bid for, the remaining funds are unblocked.
Demat & Trading Account: To invest in IPOs, you must first open a Demat & Trading Account. After allotment, here is where your shares will be housed. Any SEBI authorized Depository Participant can open a trading account for you.
UPI Id: You can either utilize an existing UPI Id associated with your bank account or establish one through the BHIM app.
Which steps do we have to follow before applying for an IPO?
Step 1– Must be an Approved Investor
You must be an approved investor as per SEBI (Securities & Exchange Board of India) guidelines. As of now, four types of investors can invest in an IPO – Qualified Institutional Buyer (QIB), Non-Institutional Buyer (NII), Retail Individual Investor, and Employees.
Step 2- Need Demat and Trading Account.
Any approved Depository Participant in India must provide you with a Demat and trading account.
Step 3 – Requird PAN
A Permanent Account Number (also known as a PAN) is required. Your bank account must be linked to this PAN.
Step 4 – Need Saving Account
The Demat & Trading Account must be connected to your bank savings or current account.
Step 5 – Need a Sufficient Credit Balance
To fund the application, you’ll need a sufficient credit balance in your bank account. While the application fee will not be deducted immediately, it will be held in escrow until the allotment date. If you are given shares, the money will be moved from your bank account to the company.
Note: If you do not receive an IPO allotment, the money you have set aside will be freed, and you will be able to utilize it for other purposes.
You may also read about: Top 10 Biggest IPOs in Indian History
What is the process of applying for an Online IPO with broker?
Step 1 – Login to your Demat Account
Login to your online account with the broker. If you do not have an online account, you need to register with your email and phone number and create an account.
Step 2 – Select the IPO Name
Go to the current IPO section by clicking on the IPO tab. From the current IPO list, select the IPO name.
Step 3 – Set the number of stocks and bid price
Enter the lot size or the number of stocks for which you want to place a bid. Select the bid price as well. Bidding at the cut-off price or the maximum price at the top end of the price band will boost your chances of getting an IPO allotment.
Step 4 – Check UPI ID and Submit
In the next step, enter your UPI ID and click the submit button. Your bid will be approved by the exchange when you approve the transaction on your UPI app.
Step 5 – Check the mandate notification
In the UPI app, wait for the mandated notice. The funds from the application will be held in escrow until the IPO’s allotment date.
You may also read about: 8 Easy Steps of IPO Process
What is the process of applying for an Online IPO with your online/Internet banking?
Step 1 – Login to Internet Banking
Use your login ID and password to access your Internet Banking account.
Step 2 – Check ASBA
Check ASBA (Application Supported by Blocked Amount) and select that tab.
Step 3 – Select the IPO
Select the IPO from the IPO list by clicking the ‘Apply IPO’ option.
Step 4 – Enter PAN and other Information
Enter the applicant’s name and PAN. Also, specify the bid quantity and price before clicking the submit button. The bid will be accepted the same day if it is submitted before 2 p.m. on a working day. If you put your bid after 2 p.m., it will be scheduled for the following day.
You may also read about: Why do we need a Demat Account?
What is the process of applying for an Offline IPO with?
If you do not feel comfortable applying for an IPO online, you can submit an IPO application in the local branch of the broking firm or bank. You must first complete an ASBA application and supply the necessary KYC information. Following that, your money will be blocked, and the amount invested will be debited once the shares have been assigned.
What are the advantages of filing an Initial Public Offering (IPO) Online?
- By not rushing to the broker’s office or the bank, you can save time.
- The online IPO application process is simple and straightforward.
- Until the allotment date, the application amount remains in your account and earns interest (only if in a savings bank account).
- The entire procedure is open to the public, and you have ultimate control.
It is more convenient and saves time to apply for an IPO online. It is, however, entirely up to you whether to use an online or offline programme. To begin your IPO adventure, find a SEBI-approved broker. These brokers will assist you in completing an application that is both seamless and transparent. To get the most out of your investment, do your homework about the firm before investing your money.
As you can see from this guidance, applying for IPOs is simple. So, the next time you come across a potential IPO and want to invest, simply follow the steps outlined above and get started!